Oct 18, 2021

Inflation Is A Tax On Everyone

Home prices have been going through the roof; but so have the prices for everything else.  For the first time in decades, we have raging inflation fueled by higher energy prices and government spending.  The federal government has pumped trillions of dollars into the economy to deal with Covid, in many cases far more than was necessary.  That money is now chasing goods, many of which are stuck off shore awaiting delivery and services.  Inflation is all about supply and demand.

Once inflation begins, the spiral is hard to stop.  Usually, what comes next is the federal reserve raising interest rates to slow down the economy and actually pull money out of circulation.  As bank interest rates go up, which is the rate the FED's charge banks to borrow money, mortgage, car loan and credit card interest rates will go up making borrowing more expensive.  This will bring down the cost of homes since buyers will need to qualify for mortgages at higher mortgage interest rates.  

But in many ways,  the cost of energy is the key to inflation because energy costs are built into everything we buy, eat, do etc.  Current federal and some state government policies are purposefully designed to drive up the cost of carbon energy, namely coal, natural gas and oil.  Gas is getting close to $5 a gallon in many areas of the country.  This is a terrible tax on the poor and middle class in particular, since spending more for energy will come at the cost of other items necessary to daily life.   Inflation is clearly a tax on everyone.